IPOs find market drought
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August 3, 1999: 5:08 p.m. ET
Four new issues fail to inspire investors Tuesday, casting doubt on future IPOs
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NEW YORK (CNNfn) - A host of new IPO issues, including the highly anticipated debut of 1-800-Flowers.com, wilted during their first trading day Tuesday, raising concerns that the market's long-running love affair with new stock issues had soured.
All four stocks making their market debuts Tuesday closing below their initial public offering levels, mimicking the broader market's turn south.
Perhaps most surprising was investors' uninspired response to 1-800-Flowers.com (FLWS), the online and telephone flower and gift order company that was expected to flourish on the market.
The company priced Monday at $21 per share, the top of its upwardly revised range, and was expected to draw favorable investor interest because of its strong fundamentals.
Instead, after hitting a high of 22-1/4 earlier in the day, the stock ultimately sagged 2-3/16 from its IPO price to close at 18-3/16.
Elsewhere, excitement over Big Star Entertainment Inc. quickly faded after the online seller of videos and digital video disks was forced to downwardly revise its IPO price to $10 per share from $12 to $14 per share. Big Star (BGST) finished its first day down 1-27/32 to 8-5/32 after hitting a high of 10-1/16.
Internet-based insurance service company Quotesmith.com received a similar reaction despite having priced at $11, the top of its expected range. Quotesmith (QUOT) fell 1-5/16 to 9-11/16 after hitting a high of 12.
Finally, advanced data communications services provider Splitrock Services Inc. (SPLT) slipped 1 to 9 after pricing its offering at the bottom of its expected range at $10 per share.
Despite the broader market's troubles Tuesday, one analyst said the newest stocks' troubles are indicative of a growing trend away from IPOs, particularly Internet shares.
"It's not a good sign," said William Smith, president and portfolio manager of the IPO Plus Aftermarket Fund (IPOSX). "Four for four is not a good record. This is an indicator that things are not going well."
Smith said IPO issues are slowly falling out of favor because of broader market concerns about impending interest rate hikes and the overvaluation of many online shares.
"It could delay some future filings or the pricing of some of these deals until things start to solidify," he said.
But Gail Bronson, senior analyst for the IPO Monitor, an online newsletter tracking the IPO industry, said the disappointing debuts may have had more to do with seasonal factors than a change in market attitude.
"Selling Internet IPOs in the summer is like selling ice in the winter," Bronson said. "Summer is not the time to come out with IPOs, particularly Internet IPOs when you need a big marketing push."
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